The Italian Competition Authority starts a second phase investigation into an airline merger


The Italian Competition Authority (ICA) has recently opened a second phase investigation under Article 16 of the Act 287/1990 into the proposed acquisition of a low cost airline, Wind Jet, by the legacy carrier Alitalia (Case C11608). The ICA concerns on the competition impact of the transaction are grounded on the high post-merger market shares of the merging parties on many routes between mainland Italy and Sicily. In particular, the merged carrier would have a 100% market shares on the Catania-Bologna, Catania-Pisa, Catania-Venezia, Palermo-Linate and Palermo-Torino routes. It would have 60% and higher market shares on the Catania-Linate, Catania-Malpensa, Catania-Roma, Palermo-Milano and Palermo-Rome routes.
It can be said that the post-merger position of the merging parties on the routes connecting airports other than the Milan airport of Linate (LIN) should not create any competition problems. The parties’ market share, though considerably high, are contestable by new operators. By making use of slots available at those airports, new operators can swiftly starting operating those routes given the absence of relevant entry barriers.
On the contrary, the transaction might create or strengthen a dominant position on the links to/from LIN due to the particular situation of this airport. In fact, LIN is a congested airport, constantly suffering from shortage of slots. The airport coordinator assigns slots to the applicants according to EC Regulation 793/2004 on the basis of a grandfather rule. Moreover, national regulation also imposes an hourly cap to frequencies that each carrier is allowed to operate at the airport. Alitalia also has 67% slots at LIN and the ICA fears that it would use the Wind jet slots to operate new routes at the detriment of competitors.
All in all, it can be thought that the ICA should conditionally cleared the proposed transaction by imposing on the parties the divestiture of a suitable number of slots at LIN. It is uncertain, however, whether such remedy will be a sufficient incentive for new operators  to enter the market and challenge the leading player Alitalia, that presumably would still enjoy a considerable market power.

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